Massachusetts Marijuana Establishment Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Massachusetts Marijuana Establishment bond
At a Glance:
- Lowest Cost: $100 per year or $10 a month
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs It: All marijuana establishments operating in Massachusetts
- Purpose: To protect the Cannabis Control Commission from financial harm if the establishment fails to pay all taxes and fees or properly destroy all cannabis and cannabis-related products if ordered to
- Who Regulates Marijuana Establishments in Massachusetts: The Massachusetts Cannabis Control Commission
Massachusetts General Law Chapter 94G Section 5 requires all marijuana establishments operating in the state to obtain a license from the Cannabis Control Commission. The Massachusetts legislature enacted the licensing requirement to ensure that marijuana establishments do not engage in unethical business practices. To provide financial security for the enforcement of the licensing law, applicants must either purchase and maintain a surety bond or establish an escrow account to be eligible for licensure.
What is the Purpose of the Massachusetts Marijuana Establishment Bond?
Massachusetts requires marijuana establishments to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the Cannabis Control Commission will receive compensation for financial harm if the establishment fails to abide by the regulations outlined in 95 CRM 500.105. Specifically, the bond protects the Commission if the establishment fails to cover the costs of destroying all cannabis and cannabis products as a result of a violation of licensing law, the costs and compensation of any required court appointees, and the costs of ceasing operations if required to do so. In short, the bond is a type of insurance that protects the public if the marijuana establishment violates licensing law.
How Can an Insurance Agent Obtain a Massachusetts Marijuana Establishment Bond?
BondExchange makes obtaining a Massachusetts Marijuana Establishment bond easy. Simply log in to your account and use our keyword search to find the “marijuana establishment” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
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How is the Bond Amount Determined?
935 CRM 500.105 dictates that the bond amount should be equal to the total amount of annual licensing fees they are required to pay. If the establishment’s licensing fees have been waived, then the bond amount should equal the amount of fees they would otherwise be required to pay without the waiver. The fee schedule is outlined in 935 CRM 500.005.
Is a Credit Check Required for the Massachusetts Marijuana Establishment Bond?
Surety companies will run a credit check on the owners of the marijuana establishment to determine eligibility and pricing for the Massachusetts Marijuana Establishment License bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Massachusetts Marijuana Establishment Bond Cost?
The Massachusetts Marijuana Establishment surety bond can cost anywhere between 2% to 10% of the bond amount per year. Monthly subscription options are also available. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.
$10,000 Marijuana Establishment Bond Cost
|Credit Score*||Bond Cost (1 Year)||Bond Cost (1 month)|
|680 – 799||$375||$38|
|650 – 679||$500||$50|
|600 – 649||$750||$75|
|550 – 599||$1,000||$100|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase the Massachusetts Marijuana Establishment Bond?
Massachusetts requires marijuana establishments to purchase a surety bond as a prerequisite to obtaining a business license. 935 CRM 500.002 states that the term “Marijuana Establishment” includes all:
- Marijuana cultivators (both indoor and outdoor)
- Craft marijuana cooperatives
- Marijuana product manufacturers
- Marijuana microbusinesses
- Independent testing laboratories
- Marijuana retailers
- Marijuana transporters
- Delivery licensees
- Marijuana research facility licensees
- Social consumption establishments
Medical marijuana treatment centers are not considered to be “marijuana establishments.”
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do Marijuana Establishments Obtain a License in Massachusetts?
Marijuana establishments in Massachusetts must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the state’s licensing guidelines for details on the process.
License Period – All Massachusetts Marijuana Establishment Licenses are valid for one year from the date the applicant’s license fee payment is approved and must be renewed before the expiration date.
Step 1 – Determine the License Classification
Massachusetts requires applicants to obtain specific marijuana establishment licenses corresponding to the nature of their business. Below are the different classifications of the Massachusetts Marijuana Establishment License.
- Cultivator: Required for businesses that cultivate, process, and package marijuana for transport to other marijuana establishments. There are 11 tiers for a cultivator license, with each tier corresponding to a different level of allowed canopy size.
- Craft Marijuana Cooperative: Required for businesses that cultivate, obtain, manufacture, process, and brand marijuana and marijuana products for transportation to other marijuana establishments.
- Marijuana Product Manufacturer: Required for businesses that obtain, manufacture, process, and package marijuana and marijuana products for transportation to other marijuana establishments.
- Marijuana Retailer: Required for businesses that purchase, repackage, white label, and transport marijuana products to other marijuana establishments and to sell to consumers
- Existing Licensee Transporter: A separate license for businesses that hold a marijuana establishment license and allows them to purchase, obtain, and possess marijuana and marijuana products for the purpose of transporting, temporary storage, sale, and distribution on behalf of other marijuana establishments or medical treatment centers to other establishments.
- Third-Party Transporter: Authorizes the license holder to transport marijuana products between marijuana establishments and medical treatment centers.
- Marijuana Research Facility: Required for organizations that conduct research on marijuana and marijuana products. Research facilities must obtain a permit for each research project they wish to conduct.
- Independent Testing Laboratory: Available to accredited organizations and allows them to test marijuana and marijuana products in compliance with the Commission’s stated protocols.
- Standards Testing Laboratory: An accredited organization that performs blind tests to verify the work of independent testing laboratories at the request of the Commission.
- Microbusiness: A colocated Tier 1 Marijuana Cultivator and/or Marijuana Product Manufacturer that is able to purchase up to 2,000 pounds from other marijuana establishments each year.
- Marijuana Courier License: Required for businesses that deliver marijuana and marijuana products from a licensed marijuana establishment or medical treatment center directly to consumers/patients at a residential address.
- Marijuana Delivery Operator License: Authorizes the business to purchase marijuana and marijuana products wholesale and warehouse and sell these products to consumers.
- Social Consumption Establishment: Required for businesses that sell marijuana and marijuana products to consumers that must consume on the premises.
- Delivery Endorsement: Allows certain microbusinesses to sell and deliver marijuana and marijuana products directly to consumers.
Step 2 – Research Local Laws
Certain municipalities within Massachusetts have additional requirements for marijuana establishments operating within their jurisdiction. Applicants should become knowledgeable about all of the local ordinances pertaining to marijuana establishments in their desired location and consult with local licensing authorities before applying through the state’s Cannabis Control Commission. Additionally, the status of each municipality’s zoning and bylaws can be found here.
Step 3 – Hold a Community Outreach Meeting
Massachusetts requires applicants for a marijuana establishment license to hold a community outreach meeting with residents of the community where their business will be located. The meeting must be held at least six months before the applicant submits their license application, and residents must be properly notified of the meeting.
Additionally, applicants must obtain an agreement with the host community that their business will operate in. More information on host community agreements can be found here.
Step 4 – Purchase a Surety Bond
Marijuana establishments must purchase and maintain a surety bond or open an escrow account (limits outlined above).
Step 5 – Complete the Application
All Massachusetts Marijuana Establishment License applications should be completed online here. Marijuana establishments must complete the application in its entirety and pay all required licensing fees. The fee schedule, including information on those eligible for fee waivers, can be found on page 16 of the Commission’s licensing guidelines document.
Step 6 – Pass Inspection
After approving the application, the Commission will conduct a final inspection of the applicant’s business location before issuing them a license.
How do Marijuana Establishments in Massachusetts Renew Their Licenses?
Marijuana establishments in Massachusetts can renew their licenses and pay all required fees (unless exempt) online here.
What are the Insurance Requirements for the Massachusetts Marijuana Establishment License?
Massachusetts does not require marijuana establishments to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, applicants may have to purchase insurance before obtaining a local business license or permit. Marijuana establishments must purchase and maintain a surety bond or open an escrow account (limits outlined above).
How do Massachusetts Marijuana Establishments File Their Bonds?
Marijuana establishments in Massachusetts should submit their completed bond forms, including the power of attorney, electronically when submitting their license applications. The surety bond requires signatures from the surety company and the licensee. The surety company should include the following information on the bond form:
- Legal name of the entity/individual buying the bond
- Surety company’s name, state of incorporation, and address
- Entity requiring the bond
- Bond amount
- Date the bond is signed
What Can Massachusetts Marijuana Establishments Do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, marijuana establishments in Massachusetts must pay all required taxes and fees and ensure that they properly destroy all cannabis and cannabis products as ordered by the Department of Cannabis Control resulting from a license violation.
What Other Insurance Products Can Agents Offer Marijuana Establishments in Massachusetts?
Most reputable marijuana establishments will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Massachusetts Marijuana Establishments?
Massachusetts conveniently provides a public database of active marijuana establishments in the state. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.